Thursday, November 29, 2012

If you are reading this, you
probably didn't win Powerball last night, better luck next time. Lottery tickets are low risk and high reward
but their low probability of returns doesn't qualify them as investments. Quant’s top rankers have a high probability
of outperforming the S&P 500 and Vanguard sees some of its funds in those
top ranks today getting more than 9 Green Reward Diamonds and less than 4 Red Risk
Diamonds. But like earlier this week, we
need to ask ourselves if it is the risk side or reward side driving the better
rankings. We may be seeing further
evidence of Quant getting more cautious rather than getting enthusiastic about the
US market; or the additional US funds in
the top ranks could suggest the correction in our markets has run its
course. That question will be answered
with hindsight but let’s take a look at those Vanguard Funds scoring well
today. The Vanguard Growth Fund (VUG) has had a good couple of weeks driving
its Behavioral Score higher but its Fundamental Score lower, both register in the
respectable mid 70s today giving that fund its 2nd place ranking. If you like to buy at lower valuations, you
may prefer the Vanguard Value Fund (VTV) in 7th place today. That fund is not up as much as its growth counterpart
in recent weeks so its Behavioral Score is a middling 63.4 but its Fundamental
Score is a high 85. If you don’t want to
decide between growth and income, consider today’s 8th place Vanguard
Total Stock Market Fund (VTI).
It refers to the total US stock market and is notable for its 3,267
constituents. An improving chart has boosted
its Behavioral Score to 72.8 while its Fundamental Score has maintained the mid
70s level. Not making the top 10 but still
scoring well is the Vanguard Information Technology Sector Fund (VGT) in 12th
place today. A good couple of weeks has
benefited its Behavioral Score but from such a deep hole that it is still in
the low 60s, the flip side of its correction is a very good 83.4 Fundamental
Score. One more to consider is the Vanguard
S&P Mid-Cap 400 Fund (IVOO) in 16th place today. Its long term chart looks better than many
but it is struggling with a short term downtrend that is keeping its Behavioral
Score in the mid 60s. Trading close to
its all time high hasn't hurt the Fundamental Score at 82.3 but a short 2 year
life limits the context on that. As
mentioned, all 5 funds have a Red Diamond Risk Rating below 4 which has driven the
average risk rating for today’s top 10 down to a low 4.14 which is a message to heed. The US market has been
whipped around by politics recently and Santa seems to like the happy talk, but
it remains to be seen if Washington's girls and boys are ready to share their
toys. So make your list and click on Quant
to check it twice, you will avoid the naughty and identify the nice.